There is good news for classic car owners in this year’s Budget, as the government is to introduce legislation to put the exemption from Vehicle Excise Duty (VED) for older cars on a permanent basis, so that from 1 April each year vehicles constructed more than 40 years before the 1 January of that year will automatically be exempt from paying the tax
This puts owners of historic cars back to the situation which applied prior to 1997, when a rolling VED exemption applied to qualifying older vehicles which were, as of 1 January of each year, 25 years old.
This exemption was frozen in 1997, which meant that for many years the tax exemption applied only to pre-1973 cars.
Budget 2014 re-introduced the exemption, and in his latest Budget Chancellor George Osborne has made it permanent from 1 April 2017, although the qualifying period remains 40 years rather than the previous 25-year limit.
At the time it was re-introduced, the Treasury said the VED exemption was designed to support the use on UK roads of classic and vintage vehicles, which the government considers to be part of the country’s heritage, and would benefit r the owners of around 10,000 classic vehicles each year.
Car tax rates and bands
At Budget 2016, the Chancellor announced that VED rates and bands will increase by RPI from 1 April 2016.
Company car tax rates (CCT) used to calculate the value of a benefit in kind for having a company car have been revised as part of what Osborne described as a move to encourage take-up of ultra low emission vehicles.
From 6 April 2019, the appropriate percentage which is applied to the list price of company cars subject to tax will increase by three percentage points to a maximum of 37% in 2019 to 2020.
There will be a three percentage point differential between the 0-50 and 51-75g CO2/km bands and between the 51-75 and 76-94g CO2/km bands.
The measure also sets the level of the appropriate percentage for the years 2017 to 2018 and 2018 to 2019 for cars which do not have a registered CO2 emissions figure and which cannot produce CO2.
Treasury estimates indicate this will bring in an additional £315m in 2019/20 and £320m in 2020/21.
Capital allowances for company car purchases
With regard to capital allowances, the government is to extend the 100% First Year Allowance (FYA) for businesses purchasing low emission cars for a further three years to April 2021.
From April 2018 the carbon dioxide emission threshold below which cars are eligible for the FYA will be reduced from 75 grams/kilometre to 50 grams/kilometre. From April 2018, the government will reduce the carbon dioxide emission threshold for the main rate of capital allowances for business cars from 130 grams/kilometre to 110 grams/kilometre.
Treasury estimates suggest this will bring in an additional £5m of tax in 2018/19, rising to £50m in 2019/20 and £100m in 2020/21.
The government says it will review the case for the FYA and the appropriate business cars emission thresholds from 2021 at Budget 2019.
Information on revised Company Car Tax rates is here
